Gooch & Housego, acousto-optic and electro-optic device maker, grew profits 8.4% last year, despite challenging markets and the falling dollar. Pre-tax profits lifted from £2.02m to £2.19m on sales up 2% to £15.9m. At first glance these results don't look too impressive but the second half saw a falling dollar against the pound, distorting achievements. Using the previous year's average rates, sales would have been £900,000 higher and operating profits £149,000 more flattering. Each of Gooch's four companies made positive contributions, with Optronic Laboratories, the Orlando-based optical instrumentation business, returning to profit. The firm's single most important product is the acousto-optic 'Q-switch', which turns a laser into an industrial tool, holding up its power and then unleashing it at once at a far greater force. Q-switch demand rose in the second half. Lasers are becoming more and more powerful, making ever more demands on the Q-switch's ability to handle power. 'Technical advances in the product are a moveable feast', says Gareth Jones, chief executive. 'We have a 90% share of the global market, worth about £7-8m.' Net debt was cut to £310,000 from £950,000, leaving gearing at a lowly 3%. For 2004, analysts are going for adjusted pre-tax profits of £2.7m, up from £2.49m, on sales of £16.4m. This gives EPS of 9.72p and a forward rating of 13 times. Buy.